M/s. Jaihind Engineers, Ahmednagar V. Income-tax Officer,

ITA 791/PUN/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 1647 (ITAT-PUNE)
• Duration Of Justice: 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 21-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAWE
• Keywords: Unexplained investment; Business income; Source of fund
• Section: 143(3); 147; 69; 148; 263

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE , BEFORE MS. SUSHMA CHOWLA, JM / ITA NO. 791/PN/2016 ! ' ' / ASSESSMENT YEAR : 2008-09 M/S. JAIHIND ENGINEERS, PLOT NO. 71, SANGAMNER CO-OP. IND. ESTATE, TAL SANGAMNER, DISTT.-AHMEDNAGAR-422605 PAN : AAEFJ2648D . / APPELLANT VS. THE INCOME TAX OFFICER, WARD 4, PUNE . RESPONDENT / ITA NO. 792/PN/2016 ! ' ' / ASSESSMENT YEAR : 2009-10 SHRI LALITA G. KALE (PROP.), M/S. JAIHIND ENGINEERS, PLOT NO. 71, SANGAMNER CO-OP. IND. ESTATE, TAL SANGAMNER, DISTT.-AHMEDNAGAR-422605 PAN : ANEPK3748C . / APPELLANT VS. THE INCOME TAX OFFICER, WARD 4, PUNE . RESPONDENT / APPELLANT BY : SHRI PRAMOD SHINGTE / RESPONDENT BY : SHRI HITENDRA NINAWE DATE OF HEARING : 12.07.2016 / DATE OF PRONOUNCEMENT: 15.07.2016 ITA NOS. 791 & 792/PN/2016 2 # / ORDER PER SUSHMA CHOWLA, JM: THE TWO APPEALS FILED BY THE DIFFERENT ASSESSEES AR E AGAINST SEPARATE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS)-2, P UNE, BOTH DATED 04-01-2016 RELATING TO ASSESSMENT YEARS 2008-09 AND 2009-10 AGAINST RESPECTIVE ORDERS PASSED UNDER SECTION 143(3) OF TH E INCOME-TAX ACT, 1961 (IN SHORT THE ACT). 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ISSUI NG THE ENHANCEMENT NOTICE FOR THE NEW SOURCE OF INCOME, THE ACTION BEI NG BEYOND THE SCOPE OF SECTION 251 (1 )(A) OF THE INCOME TAX ACT, 1961, TH EREFORE NEEDS TO BE QUASHED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN ESTIM ATING 1/5 TH OF ALLEGE TOTAL SUPPRESSED SALES OF RS.66,00,720/- AS ADDITIO NAL CAPITAL REQUIRED THEREBY MAKING AN ADDITION OF RS.13,20,144/-BEING A DDITIONAL INVESTMENT FOR CARRYING ALLEGED SECRET/UNDISCLOSED SALES BY IN VOKING PROVISIONS OF SECTION 69 MERELY ON THE BASIS OF ESTIMATION WITHOU T ANY COGENT EVIDENCE ON RECORD. THE APPELLANT CRAVES FOR TO LEAVE, ADD, ALTER, MODI FY, DELETE ABOVE GROUND OF APPEAL BEFORE OR AT THE TIME HEARING, IN THE INTEREST OF N ATURAL JUSTICE. 3. BOTH THESE APPEALS RELATING TO DIFFERENT ASSESSE ES ON SIMILAR ISSUE WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS C ONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. HOWEVER, REFERENCE IS BEING M ADE TO THE FACTS IN ITA NO. 791/PN/2016 TO ADJUDICATE THE ISSUE RAISED IN THE T WO APPEALS. 4. THE ISSUE RAISED BY THE ASSESSEE IS AGAINST THE ENHANCEMENT MADE BY THE COMMISSIONER OF INCOME TAX (APPEALS) WHICH AS P ER THE ASSESSEE IS A NEW SOURCE OF INCOME AND SUCH AN ACTION IS BEYOND THE S COPE OF SECTION 251(1)(A) OF THE ACT. THE GROUND OF APPEAL NO. 2 HAS BEEN RA ISED AGAINST THE MERITS OF THE ADDITION I.E. ON ACCOUNT OF ADDITIONAL CAPITAL REQUIRED FOR THE SUPPRESSED SALES CONDUCTED BY THE ASSESSEE, UNDER SECTION 69 O F THE ACT. ITA NOS. 791 & 792/PN/2016 3 5. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE FIRM HAD FILED RETURN OF INCOME ON 31-03-2009 DECLARING TOTAL INCOME OF ` 10,730/-. THE ASSESSING OFFICER RECEIVED INFORMATION ON SUPPRESSION OF PURC HASES AND SALES IN THE YEAR UNDER CONSIDERATION, BY THE ASSESSEE. CONSEQUENT T HERETO REASONS WERE RECORDED FOR RE-OPENING THE ASSESSMENT UNDER SECTIO N 147 OF THE ACT AND NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED TO T HE ASSESSEE. IN RESPONSE TO THE SAID NOTICE THE ASSESSEE POINTED OUT THAT THE O RIGINAL RETURN OF INCOME FILED BY THE ASSESSEE SHOULD BE TREATED AS FILED IN RESPO NSE TO NOTICE UNDER SECTION 148 OF THE ACT. THE ASSESSEE WAS ENGAGED IN THE MA NUFACTURING OF WINDING WIRE UNDER THE NAME AND STYLE OF M/S. JAIHIND ENGIN EER AT SANGAMNER, DISTT.- AHMEDNAGAR SINCE A LONG PERIOD. THE ASSESSEE HAD A LREADY FILED THE COPIES OF THE MANUFACTURING, TRADING, PROFIT AND LOSS ACCOUNT AND BALANCE SHEET. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE ASSESS ING OFFICER HAD RECEIVED INFORMATION IN RESPECT OF PURCHASES AND SALES MADE BY THE ASSESSEE. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD SHOWN TOTAL SALES OF ` 37,40,299/- WHEREAS AS PER THE INFORMATION GATHERED BY THE SALES TAX DEPARTMENT, THE SALES WERE TO THE TUNE OF ` 1,03,41,019/-. THE ASSESSING OFFICER FOUND THAT THERE WAS SUPPRESSION OF SALES O F ` 66,00,720/-. THE ASSESSEE HAD REQUESTED THE ASSESSING OFFICER TO COM PUTE THE PROFIT AT GP RATE OF 1% TO 2%. HOWEVER, THE ASSESSING OFFICER REJECT ING THE SAME AND ADOPTED GP @17% ON SUPPRESSED SALES AND MADE AN ADDITION OF ` 11,22,122/-. 6. THE COMMISSIONER OF INCOME TAX (APPEALS) WHILE A DJUDICATING THE GROUND OF APPEAL RAISED BY THE ASSESSEE WITH REGARD TO ESTIMATION OF THE PROFITS, DIRECTED THE ASSESSING OFFICER TO APPLY THE GP @12% ON THE AMOUNT OF SUPPRESSED SALES AND COMPUTE THE ADDITION AT ` 7,92,091/-. FURTHER, THE COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT THE ASSESSING OFFICER WHILE PASSING THE ASSESSMENT ORDER HAD ONLY CONSIDE RED THE ADDITION ON THE BASIS OF GROSS PROFIT, BUT HE DID NOT LOOK INTO THE ADDITIONAL CAPITAL REQUIRED FOR THE SAID ENHANCED TURNOVER. ACCORDINGLY, AN ENHANC EMENT NOTICE WAS ISSUED BY THE COMMISSIONER OF INCOME TAX (APPEALS) WHICH I S INCORPORATED AT PAGE 4 ITA NOS. 791 & 792/PN/2016 4 AND PART OF PAGE 5 OF THE APPELLATE ORDER. IN RESP ONSE THE ASSESSEE EXPLAINED THAT IT WAS PROCURING THE MATERIAL ON CREDIT BASIS AND HENCE NO WORKING CAPITAL WAS LOCKED IN CONDUCTING THE BUSINESS. ANOTHER PLE A RAISED BY THE ASSESSEE WAS THAT THE ISSUE RAISED ON ACCOUNT OF THE SUPPRES SED ENHANCEMENT WAS IN RESPECT OF A NEW SOURCE OF INCOME, WHICH WAS BEYOND THE SCOPE OF THE APPELLATE AUTHORITY. HOWEVER, THE COMMISSIONER OF INCOME TAX (APPEALS) REJECTING BOTH THE ACCOUNTS HELD THAT 1/5 TH OF TOTAL SUPPRESSED SALE AT ` 66,00,720/- WAS THE ADDITIONAL CAPITAL REQUIRED. A CCORDINGLY, AN ADDITION OF ` 13,20,144/- WAS ADDED UNDER SECTION 69 OF THE ACT. 7. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF C OMMISSIONER OF INCOME TAX (APPEALS) IN THIS REGARD. 8. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE AS SESSEE STRESSED THAT THE ENHANCEMENT POWERS EXERCISED BY THE COMMISSIONE R OF INCOME TAX (APPEALS) IN THE PRESENT CASE WERE NOT WARRANTED. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER POINTED OUT THAT THE ISSUE OF POWERS OF COMMISSIONER OF INCOME TAX (APPEALS) VIZ-A-VIZ ENHA NCEMENT STAND COVERED BY THE ORDER OF THE PUNE BENCH OF THE TRIBUNAL IN M /S. VIJAY BUILDERS VS. THE INCOME TAX OFFICER IN ITA NO. 863/PN/2013, RELATING TO ASSESSMENT YEAR 2008- 09, ORDER DATED 25-02-2015. THE LEARNED AUTHORIZED REPRESENTATIVE FURTHER POINTED OUT THAT EVEN OTHERWISE NO ADDITION IS WARR ANTED ON ACCOUNT OF SO CALLED INVESTMENT IN PURCHASES, SINCE, THE GOODS WE RE RECEIVED ON CREDIT BECAUSE OF THE REPUTATION OF THE ASSESSEE IN THE MA RKET. 9. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND PLACED RELIANCE ON THE ORDERS OF THE AUTHORITI ES BELOW. 10. ON THE PERUSAL OF RECORDS, IT IS APPARENT THAT THE ASSESSMENT IN THE CASE OF THE ASSESSEE WAS REOPENED UNDER SECTION 147 OF T HE ACT AS INFORMATION WAS RECEIVED BY THE ASSESSING OFFICER T HAT THE ASSESSEE ITA NOS. 791 & 792/PN/2016 5 HAD INDULGED IN UNACCOUNTED PURCHASES AND SALES. D URING THE YEAR THE ASSESSEE WAS ENGAGED IN THE MANUFACTURING OF WINDIN G WIRE AT SANGAMNER. THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTM ENT REVEALED THAT THE TOTAL SALES FOR THE YEAR WERE ` 1,03,41,019/-. ON THE OTHER HAND THE ASSESSEE HAD SHOWN TOTAL SALES AT ` 37,40,299/- AND THE BALANCE WAS TREATED AS SUPPRESS ED SALES TO THE TUNE OF ` 66,00,760/-. THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE REJECTED AND ADDITION WAS MADE ON ACCOUNT GP ARISIN G ON THE SUPPRESSED SALES OF ` 66,00,760/-. THE ASSESSING OFFICER APPLIED GP RATE @17% AND MADE AN ADDITION OF ` 11,22,122/-. IN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) THE SAID ISSUE WAS RAISED AND HE DIRECTED THAT THE GP RATE SHOULD BE APPLIED @12%. 11. THE COMMISSIONER OF INCOME TAX (APPEALS) DURING THE COURSE OF APPELLATE PROCEEDINGS ON HIS OWN MOTION NOTED THAT ALTHOUGH ADDITION WAS MADE IN THE HANDS OF THE ASSESSEE BECAUSE OF THE SU PPRESSED TURNOVER BUT NO ADDITION WAS MADE ON ACCOUNT OF THE VALUE OF PURCHA SES REQUIRED FOR CARRYING OUT THE SAID SUPPRESSED SALES. THE COMMISSIONER OF INCOME TAX (APPEALS) IN THIS REGARD ISSUED AN ENHANCEMENT NOTICE TO THE ASS ESSEE WHO IN TURN OF OBJECTED TO THE SAME. THE CASE OF THE ASSESSEE BEF ORE US IS THAT THE ENHANCEMENT EXERCISE CARRIED ON AGAINST THE ASSESSE E IN THE PRESENT CASE IS NOT WARRANTED AS THE COMMISSIONER OF INCOME TAX (AP PEALS) IS DESIROUS OF MAKING ADDITION ON ACCOUNT OF A NEW SOURCE OF INCOM E. THE ASSESSING OFFICER IN THE PRESENT CASE HAD ONLY LOOKED AT THE SUPPRESS ED SALES AND WORKED OUT THE ADDITION BY APPLYING SUITABLE GP RATE. NO FURT HER ADDITION WAS WARRANTED IN THE CASE. 12. COMING TO THE ISSUE OF THE ENHANCEMENT CARRIED ON BY THE COMMISSIONER OF INCOME TAX (APPEALS), THE POWERS AR E GOVERNED BY THE STIPULATED PROVISIONS OF THE ACT. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS TO FUNCTION WITHIN THOSE CONDITIONS WHILE DECID ING ANY APPEAL AND HE CANNOT EXCEED HIS POWER IN MAKING AN ADDITION ON ACCOUNT O F NEW SOURCE OF INCOME. ITA NOS. 791 & 792/PN/2016 6 IN THE FACTS OF THE PRESENT CASE BEFORE ME THE ASSE SSING OFFICER HAD MADE THE ADDITION ONLY ON ACCOUNT OF THE SUPPRESSED PRODUCTI ON. THERE IS NO WHISPER IN THE ORDER OF THE ASSESSING OFFICER VIZ-A-VIZ PURCHA SES COMPONENT AND ITS INVESTMENT IN THE GOODS RELATING TO SUPPRESSED PROD UCTION. ONCE, ISSUE HAS NOT BEEN RAISED BY THE ASSESSING OFFICER WHILE COMP UTING THE ASSESSMENT PROCEEDINGS, WHO IN TURN WAS ABREAST OF THE TOTAL F ACTS OF THE CASE I.E. THE INVESTIGATION CARRIED ON BY THE SALES TAX DEPARTMEN T AND THE SUPPRESSED SALES FOUND FOR THE RELEVANT PERIOD. THE COMMISSIONER OF INCOME TAX (APPEALS) IN THIS REGARD WHILE ISSUING THE NOTICE OF ENHANCEMENT FOR MAKING ADDITION ON ACCOUNT OF FACTUM OF ALLEGED PURCHASES UTILIZED FOR CARRYING OUT THE SUPPRESSED PRODUCTION, TANTAMOUNTS TO ENHANCEMENT BY WAY OF AD DITION ON ACCOUNT OF NEW SOURCE OF INCOME. SUCH EXERCISE CANNOT BE CARRIED OUT BY THE COMMISSIONER OF INCOME TAX (APPEALS) UNDER SECTION 251(1)(B) OF THE ACT. 13. THE TRIBUNAL IN M/S. VIJAY BUILDERS VS. THE INC OME TAX OFFICER (SUPRA) WHILE DECIDING SIMILAR ISSUE OF THE POWER OF ENHANC EMENT OF THE COMMISSIONER OF INCOME TAX (APPEALS) HAD RELIED ON THE RATIO LAI D DOWN IN THE FOLLOWING DECISIONS : I. CIT VS. SHAPOORJI PALLONJI MISTRY 44 ITR 891 (SC ). II. CIT VS. RAI BAHADUR HARDUTROY MOTILAL CHAMARIA 66 ITR 443 (SC). III. CIT VS. SARDARILAL AND COMPANY 120 TAXMANN 295 (DELHI). IV. CIT VS. UNION TYRES 107 TAXMANN 447 (DELHI). 14. THE TRIBUNAL AFTER CONSIDERING THE FACTUAL ASPE CTS OF THE CASE HELD AS UNDER : 14. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON BEING QUESTIONED BY THE AO, THE ASSESSEE VIDE LETTER DATE D 10-12-2010 HAD CLARIFIED THAT ALL THE ADVANCES RECEIVED AND PAID HAVE ALREAD Y BEEN PROPERLY RECORDED IN THE REGULARLY MAINTAINED BOOKS OF ACCOUNTS. IT WAS ALSO BROUGHT TO THE NOTICE OF THE AO THAT DURING THE SURVEY OPERATION THE PARTNER SHRI PRAKASH SANKLECHA WAS UPSET AND COULD NOT GIVE PROPER ANSWERS DUE TO TENSION. RELYING ON VARIOUS DECISIONS THE ASSESSEE HAD ARGUED BEFORE TH E AO THAT NO ADDITION IS CALLED FOR. THE ASSESSEE HAD ALSO PRODUCED THE BOOK S OF ACCOUNTS BEFORE THE ITA NOS. 791 & 792/PN/2016 7 AO TO SUBSTANTIATE THAT ALL THOSE FIGURES ARE ALREA DY RECORDED IN THE BOOKS OF ACCOUNT. ON THE BASIS OF THE ABOVE THE AO HAS NOT M ADE ANY ADDITION. FROM THE COPY OF THE AUDITED ACCOUNTS FILED IN THE PAPER BOOK WE FIND THE ASSESSEE HAS SHOWN WORKS EXPENSES AT RS.75,42,955/- AS PER S CHEDULE-M. THE SCHEDULE-M ANNEXED TO THE AUDITED ACCOUNTS SHOWS LA BOUR CHARGES AT RS.14,38,060/-. SIMILARLY, THE ASSESSEE HAS ALSO SH OWN PURCHASES TO THE TUNE OF RS.68,11,278/-. WE THEREFORE FIND MERIT IN THE S UBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE FIGURES IN THE IMPOUNDED DOCUMENT AREA ALREADY ENTERED IN THE REGULAR BOOKS OF ACCOUNT AND THEREFO RE NO ADDITION IS CALLED FOR. ACCORDINGLY, WE HOLD THAT THE ORDER OF THE LD.CIT(A ) ENHANCING THE INCOME BY RS.25 LAKHS IS NOT PROPER. 14.1 EVEN OTHERWISE ALSO WE ARE OF THE CONSIDERED O PINION THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN ENHANCING THE INCOME OF THE AS SESSEE BY RS.25 LAKHS. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. SHAPOO RJI PALLONJI MISTRY (SUPRA) HAS HELD THAT IT WOULD NOT BE OPEN TO THE AAC TO IN TRODUCE INTO ASSESSMENT NEW SOURCES, AS HIS POWER OF ENHANCEMENT IS RESTRICTED ONLY TO INCOME WHICH WAS SUBJECT MATTER OF CONSIDERATION FOR PURPOSES OF ASS ESSMENT. THE HONBLE SUPREME COURT IN THE CASE OF RAI BAHADUR HARDUTROY MOTILAL CHAMARIA (SUPRA) HAS HELD THAT THE POWER OF ENHANCEMENT OF AAC IS RE STRICTED TO SUBJECT MATTER OF ASSESSMENT OR SOURCES OF INCOME WHICH HAVE BEEN CONSIDERED EXPRESSLY OR BY CLEAR IMPLICATION BY ITO FROM POINT OF VIEW OF T AXABILITY OF ASSESSEE. THEREFORE, AAC HAD NO JURISDICTION TO ASSESSEE A SO URCE OF INCOME WHICH HAD NOT BEEN PROCESSED BY ITO AND WHICH WAS NOT DISCLOS ED EITHER IN RETURN FILED BY THE ASSESSEE OR IN ASSESSMENT ORDER. WE FIND THAT F OLLOWING THE ABOVE DECISIONS THE HONBLE DELHI HIGH COURT IN THE CASE OF SARDARILAL AND COMPANY (SUPRA) HAS HELD THAT WHENEVER QUESTION OF TAXABILI TY OF INCOME FROM A NEW SOURCE OF INCOME IS CONCERNED WHICH HAS NOT BEEN CO NSIDERED BY THE AO, JURISDICTION TO DEAL WITH SAME IN APPROPRIATE CASES MAY BE DEALT WITH U/S.147/148 AND SECTION 263 IF REQUISITE CONDITIONS ARE SATISFIED. IT IS INCONCEIVABLE THAT IN PRESENCE OF SUCH SPECIFIC PRO VISIONS A SIMILAR POWER IS AVAILABLE TO THE FIRST APPELLATE AUTHORITY. THE HON BLE DELHI HIGH COURT IN THE CASE OF UNION TYRES (SUPRA) HAS ALSO HELD SIMILAR V IEW AND HELD THAT IT IS NOT OPEN TO THE APPELLATE COMMISSIONER TO INTRODUCE IN ASSESSMENT A NEW SOURCE OF INCOME AND ASSESSMENT HAS TO BE CONFINED TO THOS E ITEMS OF INCOME WHICH WAS SUBJECT MATTER OF ORIGINAL ASSESSMENT. THE RELE VANT OBSERVATIONS OF HONBLE DELHI HIGH COURT AT PARA NOS. 11 TO 13 OF T HE ORDER READS AS UNDER : 11. A QUESTION REGARDING POWERS OF THE FIRST APPEL LATE AUTHORITY CAME UP FOR CONSIDERATION BEFORE THE SUPREME COURT RECENTLY IN CIT V. NIRBHERAM DALURAM [1977] 224 ITR 610/ 91 TAXMAN 181. FOLLOWING THEIR EARLIER DECISIONS IN KANPUR COAL SYNDICATE'S CASE (SUPRA) AND JUTE CORPN. OF IN DIA LTD.'S CASE (SUPRA) THOUGH THEIR LORDSHIPS REITERATED THAT THE APPELLAT E POWERS CONFERRED ON THE COMMISSIONER UNDER SECTION 251 COULD NOT BE CONFINE D TO THE MATTER WHICH HAD BEEN CONSIDERED BY THE ITO, AS THE COMMISSIONER IS VESTED WITH ALL THE PLENARY POWERS WHICH THE ITO MAY HAVE WHILE MAKING THE ASSE SSMENT, BUT DID NOT COMMENT ON THE ISSUE WHETHER THESE WIDE POWERS ALSO INCLUDE THE POWER TO DISCOVER A NEW SOURCE OF INCOME. THEREFORE, THE PRI NCIPLE OF LAW LAID DOWN IN SHAPOORJI PALLONJI MISTRY'S CASE (SUPRA) AND RAI BA HADUR HARDUTROY MOTILAL CHAMARIA'S CASE (SUPRA) STILL HOLDS THE FIELD. 12. THUS, THE PRINCIPLE EMERGING FROM THE AFORENOTE D PRONOUNCEMENTS OF THE SUPREME COURT IS, THAT THE FIRST APPELLATE AUTHORIT Y IS INVESTED WITH VERY WIDE POWERS UNDER SECTION 251(1)(A) AND ONCE AN ASSESSME NT ORDER IS BROUGHT BEFORE THE AUTHORITY, HIS COMPETENCE IS NOT RESTRIC TED TO EXAMINING ONLY THOSE ASPECTS OF THE ASSESSMENT ABOUT WHICH THE ASSESSEE MAKE A GRIEVANCE AND RANGES OVER THE WHOLE ASSESSMENT TO CORRECT THE ASS ESSING OFFICER NOT ONLY WITH REGARD TO A MATTER RAISED BY THE ASSESSEE IN A PPEAL BUT ALSO WITH REGARD TO ANY OTHER MATTER WHICH HAS BEEN CONSIDERED BY THE A SSESSING OFFICER AND DETERMINED IN THE COURSE OF ASSESSMENT. HOWEVER, TH ERE IS A SOLITARY BUT SIGNIFICANT LIMITATION TO THE POWER OF REVISION, VI Z., THAT IT IS NOT OPEN TO THE ITA NOS. 791 & 792/PN/2016 8 COMMISSIONER TO INTRODUCE IN THE ASSESSMENT A NEW S OURCE OF INCOME AND THE ASSESSMENT HAS TO BE CONFINED TO THOSE ITEMS OF INC OME WHICH WERE THE SUBJECTMATTER OF ORIGINAL ASSESSMENT. 13. APPLYING THE ABOVE WELL-SETTLED PRINCIPLES OF L AW TO THE FACTS OF THE INSTANT CASE, WE ARE OF THE VIEW THAT THE TRIBUNAL WAS JUST IFIED IN HOLDING THAT IN CALLING FOR A REMAND REPORT ON THE AFORENOTED FOUR POINTS, THE COMMISSIONER HAD EXCEEDED HIS JURISDICTION. WHILE COMPUTING THE TOTA L BUSINESS INCOME OF THE ASSESSEE, THE ASSESSING OFFICER HAD ESTIMATED THE S ALES AT AN ENHANCED FIGURE AND HAD APPLIED A HIGHER RATE OF GROSS PROFIT. THUS , THE ONLY MATTER DEALT WITH BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER WAS T HE ESTIMATION OF PROFITS AND GAIN OF THE BUSINESS OF THE ASSESSEE. NONE OF THE A FORENOTED FOUR POINTS HAD ANY BEARING ON THE QUESTION OF ESTIMATION OF EITHER THE SALES OR THE GROSS PROFIT RATE. FROM THE OBSERVATIONS, EXTRACTED ABOVE', IT I S EVIDENT THAT THE COMMISSIONER HAD HIS DOUBTS ABOUT THE CAPACITY OF T HE ASSESSEE TO RAISE FINANCES FOR THE PURCHASE OF GOODS AND SHOW A HUGE TURNOVER IN THE VERY FIRST YEAR OF HIS BUSINESS. IN OTHER WORDS, THE ENQUIRY O RDERED BY THE COMMISSIONER WAS TO SATISFY HIMSELF ABOUT THE SOURCE OF INVESTME NT BY THE ASSESSEE. IT IS AXIOMATIC THAT FAILURE TO PROVE THE SOURCES OF INVE STMENT WILL RESULT IN ADDITION IN THE HANDS OF THE ASSESSEE UNDER A DIFFERENT PROVISI ON OF LAW AND WILL NOT HAVE MUCH RELEVANCE IN THE ESTIMATION OF SALES AND GROSS PROFIT RATE ADOPTED BY THE ASSESSING OFFICER. IN OUR. OPINION, ANY ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT WOULD CONSTITUTE A NEW SOURCE OF INCOME WHICH WAS NOT THE SUBJECT- MATTER OF ASSESSMENT BEFORE THE ASSESSING OFFICER A ND, THEREFORE, IT WAS NOT OPEN TO THE FIRST APPELLATE AUTHORITY TO DIRECT THE ASSESSING OFFICER TO CONDUCT ENQUIRY ON THE SAID FOUR POINTS. 14. FOR THE FOREGOING REASONS, WE ANSWER THE QUESTI ON IN THE AFFIRMATIVE, I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. NO ORDER AS TO COSTS. 14.2 IN VIEW OF THE ABOVE DECISIONS WE HOLD THAT TH E LD.CIT(A) HAS NO POWER TO ENHANCE THE INCOME OF THE ASSESSEE BY INTRODUCING A NEW SOURCE OF INCOME WHICH HAD NOT BEEN CONSIDERED BY THE AO. ADDITION, IF ANY, ON THAT ACCOUNT CAN BE MADE BY TAKING RECOURSE INTO PROVISIONS OF SECTI ON 147/148 AND SECTION 263. WE ACCORDINGLY HOLD THAT BOTH FACTUALLY AS WELL AS LEGALLY THE LD.CIT(A) IS NOT JUSTIFIED IN ENHANCING THE INCOME OF THE ASSESSEE B Y RS.25 LAKHS. WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) ON TH IS ISSUE AND DIRECT THE AO TO DELETE THE ADDITION. 15. THE ISSUE BEFORE THE HON'BLE DELHI HIGH COURT I N CIT VS. UNION TYRES (SUPRA) WAS ALSO WITH REGARD TO SUPPRESSED ADDITION ON ACCOUNT OF SOURCE OF INVESTMENT AND THE HON'BLE HIGH COURT HELD THAT THE SAID ADDITION WOULD BE UNDER A DIFFERENT PROVISIONS OF LAW AND WOULD NOT H AVE ANY RELIANCE TO ESTIMATING THE SALES AND GROSS PROFIT RATE ADOPTED BY THE ASSESSING OFFICER AND WAS BEYOND THE SCOPE OF THE FIRST APPELLATE AUTHORI TY. IN IDENTICAL FACTS OF THE PRESENT CASE, THE ASSESSING OFFICER HAD MADE THE AD DITION ON ACCOUNT OF THE SUPPRESSED PRODUCTION WHEREIN GP RATE WAS APPLIED T O WORK OUT THE ADDITION IN THE HANDS OF THE ASSESSEE. THE COMMISSIONER OF INC OME TAX (APPEALS) WHILE DEALING WITH THE SAID ISSUE HAD FURTHER ISSUED AN E NHANCEMENT NOTICE TO THE ASSESSEE WITH REGARD TO THE COST OF PURCHASES UTILI ZED FOR UNACCOUNTED ITA NOS. 791 & 792/PN/2016 9 PRODUCTION. THOUGH, THE COMMISSIONER OF INCOME TAX (APPEALS) HAS WIDE POWERS UNDER SECTION 251(1)(A) OF THE ACT BUT HIS P OWERS ARE RESTRICTED AND HE HAS NO POWER TO ASSESS A NEW SOURCE OF INCOME IN TH E HANDS OF THE ASSESSEE. ACCORDINGLY, I DELETE THE ENHANCEMENT MADE BY THE A SSESSEE TO THE TUNE OF ` 13,20,144/-. THE GROUND OF APPEAL NO. 1 RAISED BY THE ASSESSEE IS THUS, ALLOWED. SINCE, THE ISSUE HAS BEEN DECIDED ON JURI SDICTION OF COMMISSIONER OF INCOME TAX (APPEALS), THE ISSUE ON MERITS STAND ALL OWED. 16. THE FACTS AND ISSUE RAISED IN ITA NO. 792/PN/20 16 ARE SIMILAR TO THE FACTS AND ISSUE IN ITA NO. 791/PN/2016 AND OUR DECI SION IN ITA NO. 791/PN/2016 SHALL APPLY MUTATIS MUTANDIS IN ITA NO. 792/PN/2016. 17. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE S ARE ALLOWED. ORDER PRONOUNCED ON THIS 15 TH DAY OF JULY, 2016. SD/- (SUSHMA CHOWLA) / JUDICIAL MEMBER / PUNE ; DATED : 15 TH JULY, 2016 . RK #$%&'()(& / COPY OF THE ORDER IS FORWARDED TO : THE APPELLANT; THE RESPONDENT; # # $ () THE CIT(A)-2, PUNE; # # $ THE PR. CIT-1, PUNE '() **+,, # +, , , . / 00 / DR SMC, ITAT, PUNE; )12 3 / GUARD FILE. #! / BY ORDER // ' * // TRUE COPY // *4 +5 / PRIVATE SECRETARY # +, , ITAT, PUNE